Tullow Oil’s profit after tax declined by 68 per
cent from $666 million (Shs1.7 trillion) last year to $216m (Shs553
billion) this year, the latest company annual financial report released
this week reveals.
As a result, basic earnings per share decreased by 73 per cent to 18.6 cents down from 68.8 cents in 2012.

According to the company chairman Mr Simon
Thompson’s report to the shareholders, the loss was due to higher
exploration write-offs and lower portfolio management profits.

According to the report, the Uganda business
contributed to the profit slump by registering a $67 million (Shs171
billion) in exploration “write-offs” in respect of its offshore Ngassa
discoveries.

The loss is part of a $280 million (Shs717
billion) write-off brought about as a result of “license relinquishments
and changes to future work programmes.”

The other write-offs in the same category include
Kenya’s $79 million (Shs202billion) due to the relinquishment of Block
10A and the UK $30 million (Shs76 billion) due to the relinquishment of
the Cameron discovery.

No returns registered
Relinquishment of a block means that the company drilled the area but failed to hit commercially viable hydrocarbons.
Daily Monitor couldn’t verify the number of unsuccessful wells Tullow drilled in Ngassa.

By press time, the company’s corporate affairs manager had not responded to email inquiries.
According
to Investopedia, an online investment dictionary, a write-off is a
reduction in the value of an asset or earnings by the amount of an
expense or loss.

Companies are able to write off certain expenses
that are required to run the business, or have been incurred in the
operation of the business and detract from retained revenues.

Transparency disclosure

Tullow performance releases also included
revelations of all its payments to foreign governments on a project by
project basis. This is the first time an oil company has ever done this.

The disclosures show the taxes, royalties, license
fees and other public revenues generated by the company’s operations
across 21 countries – 14 of which are in Sub-Saharan Africa – for the
years 2012 and 2013.

According to the report, Uganda was given income
taxes amounting to $4.1m (shs10.6billion), 136m less of last year’s
$141m (shs361.3bilion).
Uganda received another $11,000(shs28 million) in license fees last year.

At the moment it is not possible to track payments
into the Ugandan budget because they only appear as one lump sum figure
for all companies and all payments. However, the Public Finance
Management Bill currently before Parliament will, if passed in its
current form, make it possible to disaggregate oil monies from the URA
tax bandwagon.

The Bill seeks to create a petroleum fund where all oil monies will have to be deposited.

Tullow’s disclosure comes at a time Uganda government is being
pushed to join the Extractives Industries Transparency Initiative so
that it is compelled to voluntarily make public monies it gets from the
oil companies.

Global witness’s researcher George Boden hopes
that Tullow’s transparency move will help create the demand for the same
transparency on the part of governments so that citizens can ‘follow
the money’ into government accounts.

Global Witness is an international non-government
organisation established in 1993 that works to break the links between
natural resource exploitation, conflict, poverty, corruption and Human
rights worldwide.
According to a statement the NGO released,
Tullow’s voluntary disclosures were released in advance of a new
European Union law, due to come into force in the UK in 2015.

The law will require EU oil, mining and logging
companies to publish their payments to governments on a
project-by-project basis.
“Tullow’s disclosure reflects the
emergence of a new global reporting standard for natural resource
payments,” the statement reads.

It adds that the disclosures “will enable citizens
in economically poor but resource-rich regions to monitor public
revenues worth hundreds of billions of dollars and hold governments to
account for how the money is used.

Tullow came to Uganda after buying off Heritage
oil’s interests and it discovered commercial quantities of oil in 2006.
It later, in 2011, farmed down to Total and China National Offshore Oil
Company.

However, since then, there has been a slow
movement in the company’s progress in Uganda especially as regard to
acquiring a production license.
Tullow says the delay has enabled it to focus on Kenya.